Authority for Advance Ruling (AAR) has ruled that wherever canteen expenses are majorly taken care of by the employer and the employees are required to pay just a nominal amount towards the same, no Goods and Services Tax (GST) would be charged on such recoveries.
Simply put, no GST can be charged on the nominal payment made by staff for using canteen facilities provided by their employers. Tata Motors had approached the Gujarat bench of AAR for clarification whether GST is applicable on the nominal payment recovered by the Company from its staff for availing canteen facility.
Tata Motors had also requested a ruling on whether input tax credit (ITC) is available on GST charged by the party providing the canteen facility to staff of the factory. The AAR ruling said that Tata Motors offers a canteen facility to its employees, which is run by a third party service provider. A portion of the canteen charges is paid or borne by Tata Motors, while the rest, which is a nominal amount, is recovered from the staff.
The part paid by the employees is collected by the Company and further passed on to the third party canteen service provider. Tata Motors does not keep any profit margin for itself. Therefore, AAR ruled that the ITC on GST paid on canteen services is blocked credit under the GST Act and not admissible to applicant, that is, Tata Motors.